Coursera IPO: Valuation Set to Double

Coursera Sets IPO Price Range, Signaling Strong Market Interest

In a recently filed S-1/A document, Coursera has established an initial public offering (IPO) price range of $30 to $33 per share. This indicates a positive market perception of the edtech company as it prepares to become publicly traded.

Share Valuation and Outstanding Shares

Following the IPO, Coursera will have 130,271,466 shares outstanding. This figure increases to 132,630,966 when including the underwriters’ option. A valuation of $3.98 billion is projected at the lower end of the IPO range ($30 per share), considering the shares reserved for underwriting banks. At $33 per share, the upper end of the range, the company’s value would rise to $4.38 billion.

This represents a substantial increase compared to Coursera’s previous private valuation of approximately $2.4 billion, achieved during its Series F funding round in October 2020.

Fully Diluted Valuation

A more comprehensive valuation emerges when considering fully diluted shares. Including shares potentially issued upon vesting of options and Restricted Stock Units (RSUs), the total share count reaches 166,006,474, or 168,365,974 with the underwriters’ option included. This could potentially elevate Coursera’s valuation to $5.56 billion at the highest projected price and maximum share count.

However, Renaissance Capital estimates a more conservative, fully diluted valuation of $5.1 billion, excluding shares reserved for underwriters and currently vested RSUs.

Revenue Multiples and Industry Positioning

Based on the $5.1 billion midpoint figure, Coursera’s valuation equates to approximately 17.5 times its 2020 revenue of $293.5 million. Utilizing a run-rate calculated from Q4 2020 results, this multiple decreases to just above 15x.

This valuation positions Coursera similarly to a software company, which is encouraging for other privately held edtech businesses. The IPO could serve as a key indicator for the entire industry.

Addressing Financial Performance

Despite increasing deficits, investors appear confident in Coursera’s potential. The company reported net losses of $14.3 million, $13.9 million, $11.9 million, and $26.7 million across the four quarters of 2020, with the final quarter experiencing the largest loss.

Investors are seemingly prioritizing growth over immediate profitability.

Sales and Marketing Investments

Rising sales and marketing expenses contribute to these losses. In Q4 2019, the company allocated $16.7 million to sales and marketing. This figure increased significantly to $35 million in Q4 2020.

Potential Capital Raise and NYSE Listing

Coursera anticipates raising between $426.3 million and $495.8 million if underwriters exercise their option to purchase additional shares. This estimate is based on an average price of $31.50 per share.

The company intends to list its shares on the New York Stock Exchange (NYSE) under the ticker symbol “COUR.”

Edtech Sector Growth and IPO Impact

The edtech sector experienced rapid growth in 2020 due to the global shift to remote learning during the pandemic. While many companies secured new funding, public offerings have been less frequent. Coursera’s IPO has the potential to reshape this landscape by demonstrating the sector’s revenue potential to public investors.

Potential for Further Edtech IPOs

A successful Coursera debut could spur further activity in the edtech IPO market, potentially leading to more Special Purpose Acquisition Company (SPAC) mergers within the industry. Numerous SPACs are currently seeking investment opportunities, and edtech could become a prime target.

Beyond SaaS: Validating the Edtech Model

Coursera’s confidence in its public offering could validate the broader edtech sector, demonstrating that its success extends beyond the traditional Software-as-a-Service (SaaS) model.

Comparative Analysis with Chegg and 2U

Coursera’s pricing may be influenced by the performance of Chegg, a publicly traded edtech company currently valued at $92.60 per share (down from February, but up 60% year-over-year). 2U, another public edtech firm, is experiencing more challenges, trading at $38.22 with a market capitalization of $2.83 billion.

2U’s past performance – pricing at $13 per share in its 2014 IPO, peaking at $90 in 2018, and then falling to around $15 in 2019 – serves as a cautionary tale, though it has recently recovered.

Positive Outlook and Financial Flexibility

The current IPO price range represents a positive outcome for Coursera, establishing a new valuation benchmark and facilitating fundraising. If the company successfully raises over $500 million through the flotation, it will have sufficient capital to fund operations for more than 30 years based on its 2020 operating cash burn.